Machey's department store sells, on average 1200 cameras per year. The store pays a setup cost of $125 per order, and the holding cost is $8 per camera per year. It takes one week for an order to arrive after it is placed. The firm incurs a shortage cost of $10 per unit The annual demand is normally distributed with mean 1200 and standard deviation 70. With a spreadsheet model, develop an optimal ordering strategy for the firm.
1) What is your objective?
2) What is your ordering policy?
3) What are the decision variables?
4) What is the optimal policy?
5) What would change your recommendation under which circumstance?